1. A savings and loan has a return on assets (ROA) of 1.5 percent, and an equity to asset ratio of 8%. What is its ROE?
a. 18.75%
b. 15.75%
c. 12.75%
d. 10.75%
2. A bank has rate-sensitive assets of $100 and rate-sensitive liabilities of $200, which of the following answers is correct for this bank's funding gap and interest rate risk?
a. It has a positive funding gap, and hence, interest rate risk if interest rates fall.
b. It has a negative funding gap, and hence risk of a fall in its NIM if interest rates fall.
c. It has a negative funding gap, and hence risk of a fall in its NIM if interest rates rise
d. it has a zero funding gap, and hence no change in its NIM if interest rates change.
3. To measure credit risk, which of the following are indicators of great credit risk for a bank's loan portfolio relative to other peer banks.
a. A larger % of commercial real estate and construction development loans.
b. A larger percentage of net loan losses.
c. A low earnings to net loan losses ratio.
d. A low loan allowance to net losses.
e. All of the above
4. Which of the following are indicators of greater liquidity risk for a bank?
A lower core deposit to total liabilities ratio.
A larger % of off-balance sheet loan commitments.
A lower % of short-term securities to total assets.
A larger net loans to total assets ratio.
All of the above